Innovation performance of MENA countries: where do we stand?

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7. Innovation performance of MENA countries: where do we stand?Maria Giovanna Bosco and Roberto Mavilia

7.1 THE INNOVATION PERFORMANCE OF MIDDLE EAST AND NORTH AFRICAN COUNTRIES: A SLOW PACE TOWARDS CONVERGENCE

Since the pioneering studies of Robert Solow, the origins of economic growth have been pinpointed in innovation. Superior technologies provide gains in productivity and allow for a positive economic growth even in a world whose steady state would imply a long- term null economic growth. Therefore, the ability of countries to produce or import new technologies lies at the heart of the so- called process of convergence, which suppos-edly leads laggard countries (in terms of economic development) toward the best performing, industrialized countries. Once upon a time, this last definition referred mainly to OECD countries, but today, as BRIC (Brazil, Russia, India, China) countries are stepping faster on the technological scale and the economic and political crises are spreading across industrial-ized countries, this definition alone does not apply any more.

The position of the Middle East and North African (MENA) countries lies somehow in the middle between the fastest growing countries of Asia and South America and the slowest growing countries of Old Europe. Notwithstanding, Europe remains the dream and the main reference partner for most MENA countries.

In the last decades, the growth performance of MENA countries has only been moderate, if compared with other emerging countries, particu-larly in Asia. In practice, from 1961 to 2011, the annual average growth rate amounted to 5.56 per cent in MENA countries or to 4.99 per cent if we don’t consider GCC countries (World Bank, 2012). These rates approach those registered for some Latin American countries, which generally exhibit more than 6 per cent annual growth. Among MENA countries, Egypt and Turkey were included in the HSBC bank ‘CIVETS’ list of favored nations for having a diverse and dynamic economy and a young,

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Innovation performance of MENA countries 205

growing population, as well as in the ‘NEXT ELEVEN’ Goldman Sachs list of countries having the potential of becoming, along with the BRICs, the world’s largest economies in the twenty- first century.

Although the average growth performance of MENA countries is slightly greater than that of EU15 countries (about 3 per cent), several authors argue that some MENA countries have not clearly started their convergence process toward EU per capita levels (Guétat and Serranito, 2009; Péridy and Bagoulla, 2009), except Tunisia, Turkey, as well as Egypt to a lesser extent.

The positive average GDP growth rate has been basically due to the favo-rable global economic trend characterized by growth in the oil market, the development of tourism, an increase in foreign investment and immigrant remittances (with the exception of Lebanon, the Palestinian Territories and, to a lesser degree, Syria).

Nevertheless, if the figures related to per capita income are examined, a picture emerges which varies widely and is characterized by large dispari-ties. Indeed, per capita income expressed in purchasing power parity for 2009 ranged from US$2380 for Yemen to US$24 810 for Israel (World Bank, 2012).

The innovation performance of MENA cannot be stated as homogene-ous. Israel represents a case more similar to Western Economies, outper-forming EU countries in many sectors and indicators; if Gulf Cooperation Council countries are considered, their innovation and GDP performance follow another, completely different path as their industrial base is almost non- existent and as the service sector is the engine for prospective growth and as the oil reserves are due to be exhausted in 50 years or less.

The economic literature has traditionally neglected to study in depth the causes and origins of such a disappointing innovation pattern for most of the remaining MENA countries, while focusing more on trade and foreign direct investment (FDI) issues on the economic side, and on the peace, stability and migration issues of the political side. Despite the plethora of scholarly articles and international organizations’ publications on economic growth in various countries and regions of the world, the contributions on economic growth performance in MENA countries, focusing on the role of innovation and TFP (total factor productivity) growth remain limited.

Abu- Qarn and Abu- Bader (2007) have investigated the sources of MENA growth and have attempted to determine the key factors that led to economic growth in MENA countries over the period 1960–98. They found that MENA growth performance was essentially determined by physical capital accumulation and, to a lesser extent, by the accumula-tion of human capital. The contribution of TFP to economic growth was negligible; all six Arab MENA countries exhibit negative TFP


206 The economic and political aftermath of the Arab Spring


growth. Nabli and Véganzonès- Varoudakis (2007) address the empirical link between economic reform, human capital, physical infrastructure and MENA economic growth. They find a strong positive impact from advances in physical infrastructure and human capital, and a negative impact from structural reform on growth in six MENA countries over the period from 1970 to 1999. A very recent study also points to a severe lack of technological capacities and innovative activities in the MENA region and shows that region- specific features such as rent- and continuity- oriented political economy structures are simultaneously important deter-minants and hampering factors to economic development in the MENA region that can partially explain an economically inefficient allocation of resources (Brach, 2009). The importance of availability of down- scale indicators and surveys to monitor and evaluate the innovation perform-ance is discussed in Arvanitis and M’Henni (2010), who also underline the importance of reshaping the interaction of public and private actors to boost knowledge creation and diffusion and cope with the world crisis. The pervasiveness of the public sector and the inefficient scale of private initiatives are also at the heart of the more general interpretation given by Malik and Awadallah (2011).

In this chapter we draw on a few existing works on the innovation performance of the area and on the recent Knowledge Assessment Methodology (KAM) indicators from the World Bank to provide an updated picture of the classical indicators such as R&D expenditure, human capital, patents, high- tech employment and high- tech exports for the MENA countries. We will also present the current policy initiatives in the area and focus on some success cases of innovating businesses.

7.2 STATISTICS AND PERFORMANCE IN FOCUS

When looking at innovation indicators, both at input and output level, we find that the figures for MENA countries are disappointing. For the period 2006–09, the figures ranged from 0.21 per cent for Egypt to 0.63 per cent for Morocco and 0.84 per cent for Turkey and 1.13 per cent for Tunisia. Israel, where this percentage comes in at 4.8 per cent, is an excep-tion. During the same period, the United States spent 2.7 per cent of GDP on research and development, Germany 2.8 per cent, Brazil 1.08 per cent, China 1.4 per cent and India 0.75 per cent. On average, around 90 per cent of spending on research and development comes from the public sector as against around one third in the European countries. All MENA coun-tries rank below the world average (Figure 7.1), except for Israel. From the point of view of the diffusion of new technologies (such as telephone




lines, mobile phones and internet usage), the situation seems slightly better, demonstrating the efforts made in the MENA region over the last 15 years to improve their position in the area of technological supply and telecom-munications, in the aim of providing infrastructure for sustained growth. A characteristic feature of MENA countries is that the research and inno-vation sectors are quite distinguished and separated.

Actually, we find concrete and positive examples of high- level academic research carried out on one side by traditional institutions such as min-istries, research councils, universities or public centers, often hindered by modest resources, and on the other side, technological innovation is brought about through operational activities supported by the Ministry for Industry or for the Economy, with cooperation between engineering schools, technology centers (incubator centers and technology parks) and technical and professional centers.

When trying to map technology centers in the Mediterranean area (ANIMA, 2005), we get a picture where the South is characterized by more recent institutions, with fewer financial resources and less staff than in the North. Moreover, in contrast with the North where activities are implemented in a vast range of spheres (such as the environment, renew-able energy, logistics, aeronautics, multimedia and so on), in the MENA there is a heavy concentration of activities in the information technology sector, followed by the biotechnology sector. This is a major issue in the creation of employment thanks to the spreading of technological poles and innovation hubs. When compared to the successful Asian experiences

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Figure 7.1 Research and development expenditure (% of GDP), 2005




of regional innovation in Bangalore, Karnataka, India and of the Pudong district, Shangai, China, there is really not much more that can be dis-cussed. However, the creation of new businesses, of new linkages and the building of social capital is often the key to success in many regional innovation stories.

If one then looks at the impact on the creation of new business start- ups, on average in the European countries the technology centers service five times more businesses than in the South, while the ‘business nurseries’ and incubators generate up to two and a half times more businesses. In the MENA group of countries, the GCC members are outperforming the others in terms of start- up and business creation. The number of start- ups in the MENA region increased eight times in 2011 as compared to 2005. Jordan, Lebanon, Egypt and the UAE attracted most early- stage invest-ments in the same period. More specifically, the UAE attracted 17 per cent of these start- ups during 2011, according to a report released by Dubai Internet City (DIC) in collaboration with global business research and consulting firm Frost & Sullivan. The report indicates that government- backed initiatives to encourage entrepreneurship, as well as the develop-ment of universities offering programs for entrepreneurs and investors, technology parks, and incubation centers, are some of the reasons behind the surge in the small and medium- sized enterprise (SME) sector (AfricanBrains, 2012).

A definite shortcoming is the financial system attitude and involvement in innovative activities (so- called venture capital). Reasons for this weak-ness include the existence of commercial risks inherent in the launch of new initiatives, of high country risks, the absence of guarantee systems, a ‘family’ type business management system which is suspicious of external investors and the narrow outlook of local stock markets which is not con-ducive to the mobilization of investments.

But also on the financial side, each country stands on its own. On one side there is Israel, a pioneering state in the field of new business devel-opment financing, while on the other side there are countries such as Morocco, Turkey and Tunisia and, to a lesser degree, Egypt, Lebanon and Jordan, where the venture capital market has begun to develop. Finally there are Algeria, Syria and the Palestinian Territories, where this market is still at an early stage.

On the northern shore of the Mediterranean, however, the venture capital market is more developed, reporting annual investments that in 2004 were worth around 10 billion euros. Nevertheless, these countries are lagging when compared with the Northern European countries (for example, in 2006, private equity investment as a percentage of GDP was 0.61 per cent in France, 0.34 per cent in Spain and 0.31 per cent in Italy,




as against 1.258 per cent in the United Kingdom and 1.437 per cent in Sweden, while the European average was 0.596 per cent).

The percentage of high- tech exports over total exports provides an indi-cator of results in the field of innovation (Figure 7.2). Israel is the country with the highest percentage value on average (14 per cent) between 2005 and 2010 and is in line with the OECD average. The other countries in the area have much lower figures, though it is worth mentioning the perform-ance of Tunisia, which ranges between 4 per cent and 6 per cent, and espe-cially of Morocco, which has gone from almost zero to 10 per cent. In these latter two countries, it is the electrical components sector which has played a significant role, recording percentages with respect to total exports of 10 per cent for Morocco and 11 per cent for Tunisia in 2000.

Another interesting indicator in relation to innovation and technological development is technology- oriented FDI. According to ANIMA- MIPO figures for the period of January 2003 to February 2005, technology- oriented FDI to MENA countries represented 14 per cent of the total in terms of the number of projects (almost double the FDI directed towards the new member states of the EU). The investments mainly comprised financial transactions (such as start- up acquisitions, purchase of phone network licenses and the creation of venture- capital funds) and, secondly, the creation of private centers for research and development.

In terms of sectors, the ICT (Information and Communication Technologies) sector received the lion’s share with around two- thirds of

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Figure 7.2 High- technology exports (% of manufactured exports), 2009




projects, followed (with much lower shares) by the financial or business services sector (11 per cent) and by the pharmaceutical and biotechnology sector (10 per cent). The source countries of this FDI were the United States and France (with 31 per cent and 26 per cent of the total respec-tively) while the most significant beneficiary countries were Israel (33 per cent), Morocco (21 per cent) and Algeria (13 per cent).

FDI as a whole is commonly seen as a vehicle of hard and soft knowl-edge, likely to produce spillovers and channel know- how, technologies and innovative practices. According to the latest data available from ANIMA, in 2010 FDI in the area experienced some kind of sectoral rotation, with a relative loss in industries such as ICT (which used to be until recently a main attractor), agri- food, tourism and chemicals, and with an increase in aerospace, engineering and general public electronics and logistics. In terms of number of projects, the energy sector comes first with 123 projects, followed by banking (88), software (77), electrical and electronic equipment (51), engineering (51), tourism (45), building and public works (41), automobile (38) and agri- food (37) (ANIMA, 2011).

The standard, common indicator for innovation performance, patenting activity, remains quite low for the whole area, with the usual exception of Israel. Figures 7.3a and 7.3b report some figures to grab an idea of the deep differential with other developed and emerging countries, hinting at a technology gap and a wide backwardness in terms of stepping up the technological ladder. The great majority of patents filed in MENA coun-tries up to the past decade have a non- resident origin (Aubert and Reiffers, 2003).

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Figure 7.3a Patent applications, 2005


https://www.researchgate.net/publication/239920295_Knowledge_Economies_in_the_Middle_East_and_North_Africa?el=1_x_8&enrichId=rgreq-c359ec8b7dd4bcfe8094a823bac0479b-XXX&enrichSource=Y292ZXJQYWdlOzI2NjM3NTU4MjtBUzoxNDc5NjQ3MzU1Mjg5NjBAMTQxMjI4ODk1MDExMw==




In recent years, there have also been considerable efforts made to create innovation- friendly infrastructure, such as technology parks, incubator systems, venture capital funds and SME and young entrepreneur training services (particularly in Tunisia and Morocco). As regards the creation of technology parks and incubator systems, for instance, certain practical initiatives are currently in the process of being set up in various countries such as in Morocco, Jordan and Tunisia.

Tunisia is a particularly interesting case, since it is the country in which innovation has been most widely placed at the top of the political agenda, especially in President Ben Ali’s program for the period 2004–09. Among the various activities, the Ministry for Industry, Energy and SMEs is responsible for the development of technology centers. According to fore-casts, there should be 12 established by 2009. As at 2006, there were two operational, six were being built and the others were at the study stage. The Tunisian technology centers are positioned at the regional level and their objective is that of bringing together businesses, research laboratories and training institutions and centers that operate within the territory in accord-ance with the model for regional innovation systems.

The existence of such experiences in countries on the southern shores of the Mediterranean is undoubtedly positive from the perspective of developing networking systems for the various parties involved in inno-vation processes (such as local institutions, research centers, businesses and so on). In general, however, while there is quite significant potential (such as the existence of sectors of excellence in certain countries, a

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Figure 7.3b Patent applications, 2005




good qualitative level of human resources in the scientific and technical fields, a spread in large cities of new communications systems, and so on), there are considerable lags due to the previously- mentioned scarce resources allocated to research and development, an insufficient qualita-tive level of the existing technology centers, cultural mistrust towards innovation, the weakness of technical and financial support institu-tions and a still insufficient development of entrepreneurship. Despite a good qualitative level of human resources in the technical field, the weakness of the innovation systems leads to a substantial brain- drain of researchers and hence an impoverishment of resources in terms of human capital.

7.3 THE KAM INDICATORS

A recent initiative by the World Bank gave birth to a project to track and compare the performance of a country’s knowledge economy. The KAM website allows for the investigation of the level and ranking of countries in terms of a series of knowledge- related indicators: Economic Incentive and Institutional Regime, Education, Innovation, and ICT. In practice, the KAM is an interactive benchmarking tool created by the Knowledge for Development Program to help countries identify the challenges and opportunities they face in making the transition to the knowledge- based economy. Specifically, two indicators were elaborated to compare countries’ performance: the KAM Knowledge Index (KI) and the Knowledge Economy Index. The KAM Knowledge Index (KI) measures a country’s ability to generate, adopt and diffuse knowledge. This is an indication of overall potential of knowledge development in a given country. Methodologically, the KI is the simple average of the nor-malized performance scores of a country or region on the key variables in three Knowledge Economy pillars – education and human resources, the innovation system and information and communication technology (ICT). The Knowledge Economy Index (KEI) takes into account whether the environment is conducive to knowledge being used effectively for eco-nomic development. It is an aggregate index that represents the overall level of development of a country or region towards the Knowledge Economy. The KEI is calculated based on the average of the normalized performance scores of a country or region on all four pillars related to the knowledge economy: economic incentive and institutional regime, educa-tion and human resources, the innovation system and ICT. Refer to the website www.worldbank.org/kam for details on how the indicators are computed.




The maps (Figures 7.4a and 7.4b) of the Knowledge Economy Index give an idea of the positioning of MENA countries with respect to the rest of the world and to the Mediterranean basin in particular. Notice how Tunisia, Lebanon, Jordan and Turkey outperform Morocco, Algeria, Egypt and Syria. Apart from Israel, whose indicator is aligned with the most advanced Northern European countries, only Malta and Cyprus are in line with the other Southern Mediterranean EU countries such as Italy, Portugal and Greece.

While considering country groupings, we see that MENA countries’ per-formance according to the KAM indicators did not change their ranking in 2012 with respect to 2000, while East Asia and the Pacific, South Asia and Latin America did (Table 7.1). Africa as a whole lost one position, while North America remains firmly in the first position. Note, however,

0 ≤ KEI < 22 ≤ KEI < 44 ≤ KEI < 66 ≤ KEI < 88 ≤ KEI ≤ 10No data

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Figure 7.4a Knowledge Economy Index, 2000, world map

0 ≤ KEI < 22 ≤ KEI < 44 ≤ KEI < 66 ≤ KEI < 88 ≤ KEI ≤ 10No data

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Source: KAM, World Bank (2012).

Figure 7.4b Knowledge Economy Index, 2000, Mediterranean basin



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that the best performing countries in the world in terms of global KAM indicators are the Scandinavian countries, with Sweden, Finland and Denmark ranking respectively first, second and third. To find MENA countries, one has to look on the lower part of the ranking (apart from Israel), among the 75th and 115th position.

A graphical analysis of KAM indicators helps us further understand the relative positioning of the MENA countries with respect to the major geographical areas in terms of Knowledge Economy and Innovation Indicators, as well as ranking countries within the areas of Maghreb and Mashreq (Figures 7.5a, 7.5b and 7.5c).

7.4 PARTNERSHIPS, PROJECTS AND SUCCESS STORIES TOWARDS INNOVATION

In spite of the fact that the innovative performance of MENA countries remains disappointing if compared with other emerging economies, we shall notwithstanding underline that these young, growing economies do present at the moment opportunities and perspectives far brighter than many developed, Western European countries. In a post- crisis world economy which will favor sustainable approaches, the Mediterranean

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Figure 7.5a Macro areas comparisons




partner countries have the assets to take their place both as a production base for Europe and as a laboratory of the future on certain questions of universal interest – notably, the management of water, cities or energy. Most countries of the region have today committed to important reforms so that their economies evolve towards a greater opening- up to private enterprise. And the future of several sectors in the European Union relies on southern partners – joint production units, new regional branches or headquarters, commercial agreements, foreign investment, technology partnerships, and so on.

Therefore, investment initiatives focused and leading to accrued inno-vation capacity are increasing on the southern and eastern shore of the Mediterranean Sea. Many success stories can help understand in which sectors foreign partners are investing, as those provided by the consortium MedAlliance.1 We report here some of the success stories from the initia-tives more related than others to aspects of innovation creation and diffu-sion. In the IT and telecommunications (TLC) sector, Egypt has created a small ‘Silicon Valley’ in Cairo for IT service providers, helping it to become one of the top ten offshore countries for IT services. The German based

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SQS Software Quality Systems chose Egypt to build a platform and serve European markets. While the company’s offshoring centers in South Africa and India principally deal with Anglo- Saxon and international customers, the focus of the services performed in Cairo is on domestic companies in Germany, Austria and Switzerland. Besides the language skills, the cultural affinity and time difference of just one hour also contribute to the close fit between SQS Egypt and its customers. The SQS subsidiary in Cairo has experienced a successful and rapid start. By the end of its first business year in 2008, employee numbers had risen to 51, and in April 2009, they had increased to over 70.

Stonesoft Corporation from Finland is a network security solution provider. They established the Tunisia office in August 2003 and chose Tunisia because of its political stability, favorable economic situation and good relationship with Europe. From the Tunisia office they expanded operations into other North African countries such as Algeria, Morocco and Egypt, at the beginning working intensively with Tunisie Telecom and Orascom Telecom Tunisia (Tunisiana).

The G.ho.st (Global Hosted Operating System) team is a unique Palestinian–Israeli collaboration. It aims to bring employment, skills and

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Figure 7.5c Mashreq countries




hope to a troubled area and to increase dialogue between Palestinians and Israelis. G.ho.st has launched a Peace Foundation which is donating IT equipment in underprivileged Palestinian and Israeli communities.

In 2000, the France Telecom Group acquired a minority share and agreed to invest in the overall management of the then Jordan national telecom company. Knowledge transfer was then and still is a key driver for France Telecom’s investment in Jordan. With a constructive relation-ship secured with the Government of Jordan, France Telecom went on to acquire the majority shareholding of the company and integrated fixed, mobile, internet and content activities under Jordan Telecom Group in 2006.

In the transport sector, Fokker Elmo, part of Stork Aerospace, special-ists in wiring and interconnection systems for aircraft and aircraft engines, chose the Aegean Free Zone in Izmir for their Turkish facility, because of the good conditions that have been created for international companies in terms of business development, labor, set- up time, and environment. The facility in Izmir manufactures wiring systems for aircraft programs of major Fokker Elmo customers such as Boeing, EADS/ Airbus and Lockheed Martin. The facility has been fully operational since the third quarter of 2008. The facility’s size is approximately 8000m2 and there are expected to be 300–500 employees and a 50 million euros turnover in five years.

In the energy sector, various oil- related business activities opened up plants and set up collaborative projects with the local governments. Not only oil, but also the solar potential is targeted by firms such as Abener from Spain. In 2007, Abener started construction of the first hybrid plant in the world in Hassi R’Mel (Southern Algeria). This uses ISCC (Integrated Solar Combined Cycle) technology and has 150 megawatts of power. Innovation and sustainability clearly define this project with a time horizon of 2010. It represents a global pioneering experience which integrates a solar field of CCP (parabolic trough collectors) with an area of 180 000m2 of reflective surface.

Success stories can also be related to the effects of former emigrants coming back home to exploit their experiences and know- how at home. In 2010, a study was produced to assess the effects of returning migrants on the economy of their home countries (MedAlliance, 2010). In the high- tech area, at least three initiatives took place thanks to returning emigrants: Protenia, the first Moroccan biotechnological firm; RedFabriq, specialized in IT services in Algeria; and Oxia, a software engineering firm in Tunisia.




The Medibtikar Project

From 2006 to 2009, and in the framework of the Regional Cooperation of the Euro–Mediterranean Partnership,2 in the MENA area the Medibtikar project collected funds (with a budget of over 9.2 million euros) from the EU Commission to sustain SME competitiveness and technol-ogy transfer. The name Medibtikar is derived from MEDiterranean and ibtikar (Arabic for innovation) and the beneficiary countries involved were Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, Syria, the Palestinian Authority, Tunisia and Turkey. The beneficiary organizations were public and private enterprises concerned with increasing the com-petitiveness of SMEs. The mission was to provide the MEDA countries with new and improved instruments to stimulate innovation at the firm and country levels. The project was also meant to stimulate networking across the MEDA region, and between the region and the countries of the European Union.

The statutory objectives were:

●● to encourage good practice in technology and knowledge transfer by administrations, enterprises, industry federations, chambers of com-merce, etc;

●● to support the creation and/or improvement of intermediary organi-zations in charge of implementing support policies for SMEs (Innovation and Technology Centers (ITCs), TechnoParks, Incubators);

●● to support innovation management, from the development of a national innovation strategy to the identification of services to provide to SMEs;

●● to provide support to specific sectors facing common challenges in the MEDA region;

●● to develop national and regional networks supporting innova-tion stakeholders and connecting key players across the Euro- Mediterranean countries.

In 2006, Medibtikar produced a series of reports on the innovation per-formance of the MENA region. According to the results, in order to assess the innovation performance, the key factor lay in the demographic dynam-ics of the area:

Most Med- Zone countries either have gone through or are now going through a demographic transition. The usual pattern is one in which high mortality and high birth rates associated with agricultural or pre- industrial




societies are replaced first by low mortality rates leading to a population surge, and then by low birth rates in which growth returns to normal and the population starts to age. This process will have an important impact on regional demographics and will lead to an increased and urgent need for job creation. In 1960 the total labour force of the 8 Med- Zone partners was just shy of 20M people. By 2000 this had grown to almost 58M. Based on data published by the World Bank the population is expected to exceed 79M by 2010 and 98M by 2020.

Apart from this focus on labor and demography, the valued- added produced by the project has been to provide a snapshot of some of the MENA countries’ innovation systems, highlighting strengths and weaknesses.

We are therefore able to grasp the quality and depth of the innovation policies of these countries, based on the reports of Medibtikar. Syria has an innovation policy. This concerns all ministries but there is no coordina-tion structure and no system for policy evaluation. The policy prioritizes IT, manufacturing and agriculture as areas for development. Delivery is left up to the research institutes. Syria has one incubator, MAWRED, established in 2003. This is a women’s business incubator with offices in all regions of the country. It focuses on services such as design and recruit-ment. The rate of incubation is low and many of the tenants are NGOs. In 2005 MAWRED will implement an awareness road- show visiting most parts of the country. The European Investment Bank (EIB) is currently helping to establish the country’s first venture capital fund. Industry–academia linkages are very weak.

Egypt has an innovation policy implemented via measures to stimulate investment, venture capital, business incubators, industrial modernization, SME development and entrepreneurship. There is no formal coordination body. The delivery of innovation policy is carried out via the programs of the relevant ministries often implemented with assistance from donor organizations. An important point of reference is the SFD (Social Fund for Development) which finances business centers and incubators, the IMP (Industrial Modernization Program) and GAFI (the General Authority For Investment).

In Jordan policy discussions emphasize issues such as entrepreneurship, learning and creativity, as well as the creation and application of knowl-edge for the benefit of industry and society. Although there is no specific innovation policy, elements of programs dealing either with enterprise transformation or human resource development contribute to the overall goal of developing an innovative society and can be thought of as imple-menting an innovation strategy: Support for innovation comes from a variety of sources and in at least three flavors:




●● programs entirely financed by Jordanian funds such as the IRADA program or the Industrial Scientific Research Fund;

●● programs run with assistance from donors such as the JJIDP program supported by JICA of Japan, the AMIR program supported by USAID as well as the EJADA and JUMP programs supported by the European Commission;

●● Public–private partnerships such as the JEI or Jordan Education Initiative.

Key ministries are:

●● MHESR – the Ministry for Higher Education and Scientific Research;

●● MoPIC – the Ministry for Planning and International Cooperation; ●● MoI – the Ministry of Industry.

MoPIC coordinates international cooperation initiatives with the EU and EU member states such as France, Germany, the UK, Italy and Spain as well as with the US, Japan, Canada and organizations such as the UNDP, UNICEF and the World Economic Forum. It manages programs such as the SETP (Social and Economic Transformation Program). The SETP includes a range of initiatives that address human resource development, basic government services, rural development and poverty alleviation as well as regulatory and policy reform. There is a good culture of evaluation at MoPIC and it has its own ‘Department for Programs, Projects Monitoring and Evaluation’. Perhaps the most relevant MoPIC activity, however, is the work of the JNCT (Jordan National Competitiveness Team). Established in 1997 as part of a regional development initiative funded by the Dutch gov-ernment, the team is now supported by USAID. Their initial work focused on the mapping of industrial sectors and clusters. This was followed by an assessment and evaluation of the sectors and clusters with a view to improv-ing their competitiveness. Their findings have been published as a series of detailed studies including sectoral studies on IT, tourism, textiles and gar-ments, pharmaceuticals, mining, hospitals and the exploitation of the Dead Sea as a natural resource. The JNCT is now in the process of establishing an observatory on industrial competitiveness. It clearly has the potential to provide important inputs to national industry and innovation policy.

Morocco has a clear policy for innovation drawing upon the compe-tencies of several ministries, in particular the Ministry with competence for Industry and that with competence for Scientific Research and Technological Development. This policy is a result of initiatives taken by the Ministry for Industry to develop a dialogue on innovation- related




issues with the Ministry responsible for Higher Education and Scientific Research, as well as with the CNRST (the National Council for Research in Science and Technology), OMPIC (the national intellectual property organization) and R&D Maroc (the Moroccan R&D Association). Each organization has now incorporated innovation in its own strategy imple-mented via its own institutions. The Ministry responsible for Industry and its agencies, for example, are busy with initiatives to develop incuba-tors, encourage the emergence of a private equity sector, and support the development of new business in traditional and emerging sectors alike. The Ministry responsible for Research and Higher Education acting through the CNRST has clearly aligned its strategy with the goal of creat-ing an environment to support innovation. It has implemented a program of radical change intended to provide industry with access to facilities, know- how and information. This program involves the development of new university–industry interfaces, the introduction of ‘innovation’ as an action line in PROTARS, Morocco’s framework program for RDT, as well as a network of university- based incubators. High- level coordination of innovation policy is assured by the Permanent Inter- ministerial Committee for Scientific Research and Technological Development.3 This was estab-lished in 2000 and is chaired by the Prime Minister. It meets annually or in extraordinary meetings if needed. At a more operational level innovation- related programs such as EUREKA or the FSP4 have their own steering committee. Innovation- related networks such as the RDT,5 RGI,6 RIE7 and the National Business Creation Initiative all have their own coordina-tion committees. The government is now in the process of developing a new network entitled the ‘Network for Innovation and Creativity’.

Algeria has neither an RDT nor an innovation policy. An RDT strat-egy is being developed and the ‘Agence Nationale de la Valorisation des Resultats de la Recherche’ tries to link research with business development. Some elements of an innovation infrastructure are now being developed. Algeria has one venture capital fund, FINALEP. It is drafting legislation to create better conditions for private equity players. Plans exist to boost the availability of venture capital and to provide financing for SMEs. A tech-nology park is under construction, measures are being taken to promote entrepreneurship and plans exist to develop a national fund for RDT and innovation. The main actors are the Ministry for Small and Medium Sized Enterprise and the Ministry for Higher Education and Scientific Research.

Tunisia has a range of policies that emphasize new enterprise develop-ment or new business creation, although there is no formal mechanism for coordination on innovation. It has made good progress in the last five years on building up a private equity sector as well as a system of incuba-tors and technology parks, but much remains to be done.




An especially detailed, although not up- to- date, analysis of MENA countries’ innovation systems was realized in 2002 by the World Bank. In particular, the countries were grouped according to their features:

Three categories of countries can be identified in the MENA region. A first category (Algeria, Egypt, for example) seem to have made serious attempts to integrate S&T into economic development and have accumulated some non- negligible experience. This experience, considered the richest in terms of technology acquisition, appears to have started laying down the basis for an S&T policy and NSI, though not explicitly, in the early seventies. A study conducted in 1996 under the auspices of the Egyptian Ministry of Scientific Research and funded by the World Bank has identified several strengths of the Egyptian S&T system: tremendous human resources with a large number of highly educated and specialized personnel, a considerable number of R&D institutions in various disciplines, many examples of success, particularly in agricultural research and other well focused industries, long tradition of S&T and Government commitment towards S&T institutions. The main driving vectors of this policy included: engagement in programs of scientific research, both fundamental and applied, massive transfer of up- to- date technologies from various advanced countries and substantial investments in education and training, locally and abroad. A second category, more oriented towards market- driven growth and the contribution of foreign capital to industrialization, (Morocco and Tunisia in the Maghreb, and Jordan and Kuwait in the Mashrek for example) were left with little elbow room to link up S&T policy to economic development policy. The technological decision was to a large extent in the hands of foreign firms, at a time when the industrial base of the country was being laid down. Although these countries have managed to develop local industries of small and medium size type, they were no clear bodies in charge of S&T policy and the level of awareness of the fundamental role of S&T in development was relatively low. Thus the basic ingredient for setting up the basis for NSI was missing. A third category of countries (Libya and Mauritania for example), which lack a sufficient industrial base and are small both in terms of population and markets, had S&T policy and its integration into economic policy low on their agenda. Current potential and infrastructure are unlikely to provide the basis for an NSI (World Bank, 2002).

Recently another ambitious project was included in the file of actions of the Unions for the Mediterranean: the MIRA (Mediterranean Innovation and Research Coordination Action) project. MIRA is a large platform joining policy makers and the European Commission for the observation, analysis and promotion of shared science and technology policies in the MENA region and is devised as a policy discussion forum between EU members and Southern Mediterranean partners. One of the main tasks is to collect indicators according to homogeneous criteria and to support the monitoring of innovative projects and initiatives.




7.5 THE KNOWLEDGE ECONOMY FOR GROWTH AND EMPLOYMENT IN MENA PROGRAM

The Marseille Center for Mediterranean Integration (CMI) was created in 2004 and is a World Bank administered platform for multi- partner programs, aiming to enhance the convergence of sustainable development policies by providing a platform for knowledge sharing and joint learning.

A pillar among the projects undertaken is the implementation and support of the Knowledge Economy. The Knowledge Economy for Growth and Employment in MENA program brings together the World Bank’s MENA region, the World Bank Institute (WBI), the European Investment Bank (EIB), and key regional partners, such as the Islamic Educational, Scientific, and Cultural Organization (ISES CO). The program, described in the 2011 Annual Report of the CMI, uses the wealth of knowledge assembled by the partners, and focuses on the ‘how to’ of making an effec-tive transition to the KE. Its design has incorporated substantive advice from key CMI counterparts, especially Egypt, Jordan, Lebanon, Tunisia and Morocco.

The work will include analysis of the four KE ‘pillars’ (a favorable eco-nomic and institutional regime, a dynamic innovation system, a strong ICT infrastructure, and a reformed education system). Recent events in the region provide an opening to emphasize the importance of tackling governance issues in the transition to the KE, and making improvements that can promote trust- based, open, and change- friendly societies. Many, if not most, of the countries that have made rapid progress on the KE, such as South Korea and Finland, have staged nationwide KE- inspired programs of change. Ambition should be high – Tunisia has what it takes for a modern knowledge economy just as, for example, Estonia did. Moving forward means acting on the four KE pillars while implementing pragmatic policies customized to country specificities and making institu-tions more responsive to KE needs and opportunities.

The development of this work is being complemented with consulta-tions, beginning with a workshop to foster dialogue among stakehold-ers in MENA countries in November 2011. The ensuing KE report will integrate the key findings from analytical work and the consultations, and highlight ways in which MENA countries can develop modern knowledge- based economies that are more agile, internationally net-worked, and constantly learning. The report will be presented at a high- level conference to take place at the CMI with policy makers and change agents in 2012. Other innovation- related programs led by CMI include the program on Supporting the Promotion and Financing of Innovation in the Mediterranean.




7.6 CONCLUSIONS

In April 2012, a high- level conference was held by the European Commission’s Research and Innovation DG, in consultation with other departments, the European Parliament, the EU Member States and the Mediterranean countries. The scope of the conference was to highlight the Research and Innovation challenges and perspective for the EU MENA countries, even in a politically troubled situation such as the current one. Participants agreed on a series of conclusions that we chose to share here in that they perfectly conclude our analysis (Ayache and Brach, 2012).

The main problems shared by all countries in the Mediterranean are the uncertain economic perspectives and the devastating job situation. A large share of the youth population is currently unemployed, as are, increas-ingly, highly skilled and trained graduates from universities and technical higher education institutions. In this context, innovation and research are facing two central challenges: first, to keep up and further support excel-lent research and teaching institutions. In economic and politically difficult times, this becomes an even more difficult task. Cutting down education and research budgets is often a consequence; however, this must not happen. The second challenge is to find the balance between excellent and frontier- pushing basic research on the one hand, and the development of marketable ideas and innovation on the other. This balance is essential in order to create new knowledge that future generations will be able to draw on and to (further) develop the urgently needed innovative and entrepre-neurial skills that will help the young generations to be able to create new jobs.

With respect to these challenges, the Arab Mediterranean (MED) countries face two main problems: limited technological and innovative capacities (Brach, 2009; Brach and Naudé, 2012), and a weak culture of innovation (Pasimeni et al., 2007). Despite the fact that Euro–Med coop-eration in the past never explicitly concentrated on strengthening innova-tion and research, different initiatives have dealt with and supported these topics. However, the participation of Mediterranean countries in scientific cooperation with the EU has been very low. Less than 1 per cent of the allocated contributions and only 10 out of 220 contracts were signed with MED countries in the Fifth Framework Programme (FP) (European Commission, 2005). Only three MED countries, Tunisia, Morocco and Algeria, were involved. The range of countries was significantly expanded in the FP6 (2003–05) to include eight countries (the three North African countries plus Egypt, Jordan, Lebanon, Syria and the Palestinian Territories) and yet the participation of MED countries remained low in an international comparison (cf. Pasimeni et al., 2007). However, the


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documentation and availability of coherent data is very difficult to access. To the best of our knowledge, no systematic overview of the evaluation of key figures of interest such as the number of contracts and contract-ing partners, or the share of the funds allocated by developing region was available. The same is true for innovation and research indicators, as for example business enterprise expenditures for research and development, number of publications, the number of researchers and others that are regularly compiled by the Commission’s joint research center which are not available for the MED countries (Joint Research Center, 2012).

Several reasons are partially accountable for the low participation and success rate: a lack of tailor- made policy instruments that are fitted to the situation that these countries are facing and that are directed at solving central problems. As a result of a lack of capacities and skills as well as a low prioritization of research and innovation by the political actors in the MED countries, there seems to be very little strategy for directing the inno-vation towards developing new capabilities and entering new, more sophis-ticated markets based on the existing know- how. The argument concerning a lack of feedback and evaluation mechanisms applies here too. Only rarely is relevant data available, and if it is, this knowledge is rarely used.

The conference pointed out three key elements in order to develop research and innovation in the MENA countries:

1. Bring research and innovation closer together and align existing pro-grams and initiatives at the level of the European Union, at the level of Euro–Mediterranean relations, and at the level of the Mediterranean countries.

2. Unleash the innovative potential in the MED region and make direct use of research and innovation for socio- economic development in MED region in the medium and long term. Innovation is widely and correctly considered as the key driver of sustainable economic development.

3. Fit research and cooperation to strengthen innovation and marketable knowledge in the Mediterranean region. Research is the art to ques-tion, analyze and reflect the status quo and to push the knowledge frontier. As such, research is an important ingredient and determinant of the innovation process. Innovation always needs research.

NOTES

1. MedAlliance is a consortium managed by ANIMA and financed at 75 per cent by the European Union running the program Invest- in MED, whose aim is to develop busi-




ness relations, investments and partnerships between the two opposing shores of the Mediterranean, http://www.invest- in- med.eu/.

2. The Union for the Mediterranean promotes economic integration and democratic reform across 16 neighbors to the EU’s south in North Africa and the Middle East. Formerly known as the Barcelona Process, cooperation agreements were relaunched in 2008 as the Union for the Mediterranean (UfM). The relaunch was an opportunity to render relations both more concrete and more visible with the initiation of new regional and sub- regional projects with real relevance for those living in the region. Projects address areas such as the economy, environment, energy, health, migration and culture. Along with the 27 EU member states, 16 Southern Mediterranean, African and Middle Eastern countries are members of the UfM: Albania, Algeria, Bosnia and Herzegovina, Croatia, Egypt, Israel, Jordan, Lebanon, Mauritania, Monaco, Montenegro, Morocco, the Palestinian Authority, Syria, Tunisia and Turkey.

3. Comité Permanent Interministériel de la Recherche Scientifique et du Développement Technologique.

4. Fonds de Solidarité Prioritaire, a French development tool.5. The ‘RDT’ stands for ‘Reseau de Diffusion de Technologie’ or ‘Technology Transfer

Network’.6. The RGI stands for ‘Réseau de Génie Industriel’ or ‘Industrial Engineering Network’.7. The RIE is the ‘Réseau d’Incubation et Essaimage’ or ‘Spin- off and Incubation

Network’.

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